GoldPrice.

Happy Friday, traders. Welcome to our weekly market wrap, where we look back at these last five trading days with a focus on the market news, economic data, and headlines that had the most impact on gold prices and other key correlated assets—and may continue to into the future. 

Despite looking on track for another week in the red just 24 hours ago, gold prices are poised to close Friday's trading with a strong gain and one of the biggest week-to-week pickups for the yellow metal in all of 2022. 

So, what kind of week has it been? 

The question of "how was your week?", at least as it concerns price action in just about every major asset priced in US Dollar, is going to engender a less than positive response from most investors, and prior to Friday, it seemed like gold-longs would count themselves among the disgruntled. Stock markets in the US have been on the slide all week and, as of Friday noon, don't look particularly likely to take a different tack before trading closes for the week. Key parts of the commodities complex had been down this week as well-- with the important exception that crude oil prices continue to catch a tailwind from the uncertainty of geopolitical tension. After a steady, if unexciting, start to the week, gold prices fell sharply midweek; Treasury yields were back on the rip, with the 10-year yield back above 4.1% today and pointing higher. 

None of this happened in a vacuum, of course. All of these asset categories (and more) moved lower under the familiar pressure of a rallying USD: On Thursday morning, the US Dollar index briefly peaked north of 113, near multi-decade highs. And it does feel like it would be a little insulting to ask a rhetorical question at this point in the game; so, just to state the obvious: the reinvigoration of the US Dollar's 2022 surge comes down to the FOMC, which delivered another 75 basis point hike Wednesday afternoon, and a more hawkish tone than many expected.  

 The FOMC's +0.75% hike-- the fourth-consecutive "triple hike" of 75 basis points and the sixth consecutive hike of any size from the Fed this year-- was directly in-line with the expectations that had come to be consensus by the start of this week. As such, markets had been mostly calm but with a low risk-off hum in the background through the first trading days of the week. The slightly worried tone of the marketplace supported gold spot prices in those early sessions; the yellow metal's chart rode a steady line along $1650/oz. Investors and other Fed watchers were also hoping for the central bank to indicate plans to at least slow the pace of these rate hikes in the coming months, if not pause the hikes entirely. We saw a version of the latter, with the addition of language to the committee's formal statement that suggests the FOMC will allow themselves the flexibility to adjust pace or path in light of relevant changes to economic data or other inputs. 

...and economic and financial developments.”

It is not a commitment to slow down in December, but it is clearly scene setting.

They raised rates today by 3/4 of a point, their 4th move of that size and 6th move this year, as expected. But this add to the statement is all new.

— Jeanna Smialek (@jeannasmialek) November 2, 2022

This initial "win" for investors hoping that the Fed will slow (or slack) their tightening of financial conditions in the near- to medium-term saw equities across the board and commodities turn higher and make considerable gains on the day. Gold's rally was among the most enthusiastic, topping out near $1670 immediately post-FOMC. It wasn't to last. 

The 3 takeaways from Powell's press conference:

1) The Fed could step down to a slower pace in Dec even if inflation data don't improve much
2) If there had been new estimates of the terminal funds rate released today, they would have moved up
3) Not ready to talk about a pause

— Nick Timiraos (@NickTimiraos) November 2, 2022

In his Q&A press conference, Fed Chair Jerome Powell leaned heavily into the hawkish shade, pushing a narrative that's being constantly referred to as "slower, not lower"-- that is, Powell has underlined the FOMC committee statement's implication that December's rate hike will be a lower increment than 75 bps, but that the Fed is still targeting the same terminal rate next year in order to tighten monetary conditions and mute demand to cool the still-eye-watering levels on inflation in the economy. It's, in fact, possible, suggested Powell, that the path of rate hikes might end with a terminal rate higher than the market is expecting. 

Did Powell just basically tell us to stay in cash?

— Angie G (@MomAngtrades) November 2, 2022

In light of these comments on Wednesday afternoon, through Thursday's markets and—for most asset classes—continuing on through Friday, virtually everything has been pummeled by the US Dollar's aggressive post-FOMC rally on expectations for higher interest rates in the US for longer. A general tone of fear and uncertainty about the collateral damage that could be done to the US economy in the name of this crusade against inflation is further fueled a sell-off in everything but the Greenback; as equities very quickly shed the initial gains and sank into big losses on the day, bond yields soared once again and gold spot prices quickly dropped to $1630 in a slide that wouldn't bottom-out until reaching below $1620 in the early New York hours of Thursday. 

Friday, and the release of October's Jobs Report, has seen a divergence for gold, however. For the Dollar as well, and the two are certainly connected. The primary assessment of the US labor market's health is viewed (and reported on, in most media) as a mixed bag: The headline unemployment rate remains historically low but, despite coming in slightly above expectations (and revising last month's number considerably higher,) the NFP number is being reported on as possibly signaling the slowest one-month job growth for the US economy in more than 18 months.  

The result in the markets has been a strong and fast sell-off in the US Dollar, with the USD Index dropping back below 111.0 on Friday. The presumption is that investors (reasonably or otherwise) are reading the October Jobs Report as a removal of some level of support for the Fed to continue slowing the economy down aggressively. (Remember, Powell & Co. have consistently pointed to the still-strong labor market as a "green light" to continue tightening.) This flavor of optimism hasn't been pervasive in markets on Friday—equities have been flat-to-mixed at best—but if the Dollar is the biggest loser in Friday's change of trend, gold has been the easy winner. The yellow metal rallied sharply with the release of Friday's labor market data and has continued to rise since. Moving towards the weekly close, gold spot prices are nearing $1680/oz and en route to a 2% gain and one of the best weekly pickups of 2022. 

Next week should bring a run of public commentary by Fed officials that will help shed light on this week's developments and how individual participants view the next step(s) for the central bank; and we'll be cautious about expecting Friday's high-powered rally to persist, as this kind of Friday performance typically seems to peter-out in the more sober light of Monday.  

For now, traders, I hope you can get out and safely enjoy your weekend for the next couple of days. After that, I'll see everyone back here on Monday for our preview of the week ahead.